Ways to Lower Car Insurance During COVID
Auto insurance companies have tried to adapt to the fact that lots of customers struggle to make ends meet during COVID. Many providers, small and large, have instituted COVID relief programs to help policyholders who are undergoing financial hardship during the pandemic.
Here are a few programs to look into.
Premium Refunds and Credits
Most major auto insurance companies offer some type of car insurance refunds during COVID. Insurance providers are more likely to offer refunds to people who can show that they’re driving less during COVID due to remote work, online schooling, sheltering in place, and quarantine orders.
Until the country is able to flatten the infection curve to a safe level, the Centers for Disease Control and Prevention (CDC) will likely continue to make similar stay-at-home recommendations to prevent the spread of the deadly coronavirus.
As such, carriers are likely to continue to give credits toward future premium payments or a refund of a portion of the premiums already paid.
If you’re waiting on federal COVID relief or extended unemployment checks and just need a little more time to make your next payment, call your insurer and ask for a COVID-related grace period. Most insurance companies have extended their grace periods during the pandemic.
Auto insurers are generally providing a 30-day grace period after payment is due without losing coverage. Some states like California issued notices requesting that all insurance companies provide their state policyholders with at least a 60-day grace period to pay their premiums.
Payment Deferral or Forbearance Programs
Some companies have payment deferral or forbearance programs that toll, meaning temporarily stop insurance payments. The downside to deferral and forbearance programs is that the interest continues to accrue during this period, and is added back after the deferral or forbearance period is over.
These programs can lead to significantly increased premiums in the end. But, for some policyholders, this may be the only option that offers a break from payments while maintaining auto insurance coverage.
Raise Your Deductible or Reduce Your Coverage
There are two surefire ways to reduce your monthly car insurance.
One is to increase your deductible. Consumers, on average, can save up to 10 percent by increasing their deductible by $500. A deductible is the amount a policyholder pays out of pocket before an insurance provider will pay a claim or expense.
The other way is to eliminate add-on coverage you may not need during COVID. Review your bill and look for extras like travel insurance, which most people don’t need because they’re not doing leisure travel right now.
Also, consider temporarily removing extra drivers on your policy, like a student who won’t be driving for the remainder of the school year.
Even though you may be looking to eliminate some add-on coverage, you may want to think twice about cutting comprehensive coverage.
Comprehensive car insurance covers anything that is not collision-related, like weather-related damages, fire, theft, vandalism, and windshield breakage. It may make sense to keep comprehensive coverage during COVID.
Change to Non-Owner Coverage
If you stopped owning a car during COVID but still drive a rental car, a friend’s car, a family member’s car or some other vehicle not owned by you, consider switching to non-owner car insurance.
Non-owner car insurance is exactly what it sounds like: car insurance for people who don’t own vehicles. It is designed for people who don’t own a vehicle but often borrow or rent one. Most people can purchase non-owner coverage at rates averaging between $300 and $500 a year.
Traditionally, auto insurance policies are offered in six-month or one-year increments. That said, some companies have coverage plans that allow you to purchase a policy for a limited time, a specified circumstance, or based on mileage.
Switch to Cheaper Insurance
First of all, switching to another insurance company does not automatically mean lower premiums. That said, cutting costs by changing your provider could be an option.
In fact, US News & World Report says consumers should use the involuntary downtime imposed by COVID to reassess whether their current insurer is offering the best rates for their needs.
Before switching insurance companies during COVID, you should:
- Read your entire policy carefully so that you’re familiar with the terms and the consequences of making any changes.
- Find out your policy’s renewal date because you may have to pay an early termination fee if you cancel after the renewal window.
- Get competitive auto insurance quotes so you can compare them against each other and to your current rates.
What Not to Do With Car Insurance During COVID
As you can see, there are several things you can do to lower your car insurance costs during COVID. But equally as important is what not to do with your car insurance during the pandemic.
Don’t Let Your Car Insurance Lapse
Your coverage could lapse or be canceled by the insurance company if premiums aren’t paid on time. That is why it’s important to request a grace period, deferment or forbearance as soon as you suspect you may need more time to make a payment.
Don’t Cancel Your Policy
Don’t ever cancel your insurance without getting replacement coverage. Just canceling your insurance because you could no longer afford it could raise your rates later. Try to find a short-term solution, like the ones suggested above, with your provider.
What happens if my car insurance lapses or cancels?
All states require drivers to be financially responsible, and most have mandatory auto insurance requirements with minimum liability coverage limits.
If you let your policy lapse or cancel, you can’t legally drive a vehicle. Driving without insurance can be a costly decision. If you get caught, you could get ticketed, have to pay a fine, have your driver’s license suspended or revoked, or even go to jail.
Additionally, most vehicle financing companies contractually require the borrower to maintain car insurance. If you no longer have car insurance, the financing company may be able to take back the car.
If you need relief from your car insurance premiums due to financial hardship, contact your provider about the COVID-19 relief programs they may be offering.
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